Stop over-relying on foreign investments, government told

From Investvine.com

Soon after the enactment of the Ease of Doing Business and Efficient Government Service Delivery Act, research group IBON said that the Duterte government should not depend on foreign investments for economic progress and job generation.

For expediency, the Ease of Doing Business Act or Republic Act (RA) 11032 simplifies the application process for the establishment of businesses in the country. Proponents say that RA 11032 aims to attract more foreign investments.

IBON said however that even after several decades of rising foreign investments, domestic industries and agriculture remain lagging, while the Filipino people continue to be mired in a poor jobs situation.

Foreign direct investments (FDI) have grown by 391% from US$664 million in 2013 to US$3.3 billion in 2017. But most of these investments have gone to foreign export enclave manufacturing, business process outsourcing, commercial and residential real estate, and transport infrastructure. These areas are profitable for foreign and local big business, but not necessarily beneficial to the country’s economic development, said the group.

IBON explained that investments have remained scarce in domestic industries and agriculture sectors that are much-needed for sustainable and genuine growth and job generation. For instance, agriculture only received 0.6% (US$19.6 million) of total FDI in 2017. Meanwhile, the gross domestic product (GDP) share of agriculture declined from 10.5% in 2013 to 8.5% in 2017. Manufacturing remains stagnant with minimal change from its 22.8% GDP share in 2013 to 23.6% in 2017.

Rising FDI has not translated into improved job generation. IBON noted that the number of employed Filipinos fell by 663,000 from 40.3 million in 2017 from the previous year, which is the biggest contraction in employment in 20 years. The labor force participation rate (LFPR) also dropped to 63.7%, the lowest in 20 years when it was 63.1% in 1985 during the severe economic crisis. More recent official labor data for the first quarter of 2018 shows that there are over one million underemployed despite higher employment and lower unemployment.

Before RA 11032 was signed, the World Competetiveness Report showed that the Philippines’ attractiveness to corporations wanting to do business here was diminishing. The country’s ranking plunged by 9 slots, reportedly the biggest drop in Asia, due to employment concerns and poor social infrastructure.

IBON however said that instead of focusing on attracting foreign investments, the Philippine government should first ensure its control over key local industries, utilities and services, as well as place national interest and public welfare above local and foreign big business interests. For the country to truly benefit from foreign investments, these should be planned in accordance with genuine domestic development, with close government monitoring and regulation, said the group.###

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